Beauty and Grooming among the culprits as P&G post big sales drop
Net sales for the quarter were $16.5 billion, a decrease of 12% versus the prior year due primarily to significant foreign exchange impacts. Organic sales, excluding the impact of currency, divestitures and acquisitions, decreased 1%.
The Ohio-based company, which gets almost two thirds of its revenue from markets outside North America, was also hurt by a nearly 13% rise in the dollar against a host of major currencies in the past year.
With all categories seeing a dip, Grooming came off worst with a 14% drop in net sales, with the Beauty segment, which was the subject of a huge divestment earlier in the year, the second worst with a 12% decrease.
“Top-line results were soft, as expected, given significant foreign exchange impacts, our deliberate choices to exit unprofitable businesses and the early stage of the improvement plans we’re implementing in our largest categories and markets,” says Chairman, President, and Chief Executive Officer A.G. Lafley.
“We continue to make strong progress on productivity savings, which will fuel smart investments in top-line growth.”
The business unit to see the biggest drop was Grooming, which includes the Gillette and Braun brands.
Weaker demand in Blades & Razors due to competitive activity and previous fiscal year price increases were the main factors here, along with negative geographic and product mix, although higher pricing on Blades and Razors, growth on Braun from innovation, and increased trade support, helped to minimize this impact.
As mentioned above, the Beauty segment lost several categories and brand back in July in the Coty deal, and P&G clarified that its guidance for fiscal year 2016 Core EPS is relative to fiscal 2015 results, revised for the impacts of moving earnings from the Beauty categories it plans to exit to discontinued operations.
Once again volume was the main issue in Beauty this quarter, with decreases in Skin and Personal Care due to competitive activity and portfolio SKU reductions. These were partially offset by growth from marketing and innovation on the super-premium SK-II brand.
Hair Care, a category heavily affected by the brand divestment, saw volume also decline due to competitive activity and price increases in the previous fiscal year.
Looking ahead, Lafley focuses on organic sales saying he expects this growth to be positive and “to further strengthen in the back half as we invest to build awareness and trial of our consumer-preferred products and brands.”